As the holiday shopping season moves into post-Christmas sales and returns, the exchange of paper notes in developed countries is becoming an increasingly rare occurrence. Leading the charge are Scandinavian countries, where 90 percent of transactions are electronic, through credit and debt cards and online options.

The United States is not far behind. Well over 80 percent of transactions are through cards, digital wallet apps, online services such as Paypal and Venmo, and other non-cash options, according to the Federal Reserve, and that share is only likely to grow. The number of non-cash transactions jumped more than 40 percent between 2012 and 2018 to 174 billion from 124 billion, according to the Fed. The values on the transactions climbed 24 percent during this period to $97 trillion from $78 trillion.

Whether in Houston or Stockholm, the factor driving the trend is the same: convenience. In Houston, some businesses such as the Montrose bar, Bar Boheme, and retailer Marye-Kelley Gift Shop on Westheimer, have gone cashless.

“I probably use Paypal once a week with friends,” said Jen Grove, an airline insurance broker who lives in Houston Heights. “If you are out with friends and someone doesn’t have cash or wants to put a meal on their credit cards, you can transfer money among friends using Paypal or Venmo and just send the money.”

Mia Kaariniemi, a Swedish translator living in Stockholm, said she has not used cash in roughly two years.

“We always use a credit card, for everything,” she said. “It is so convenient that even if you buy a stamp, it is with a credit card. And you never visit a bank these days, you only bank online.”

Tech matters

The difference in the speed in which countries move to non-cash payments is largely driven by the access of households to banks, banking products — and technology. Sweden is in part a leader in non-cash payments because it is one of the the fastest adopters of new technology, analysts said.

More than 90 percent of Swedes bank online, and they use more mobile data than any of the other 35 other developed countries, apart from South Korea.In addition, Swedes have high confidence in their financial institutions, satisfied that cashless transactions will be backed up and safeguarded, according to Anders Ek, a credit analyst at Kreditgivning, a financial services firm is in Stockholm.

“Swedes have not experienced financial collapse in a very long time,” he said. “As a result, they trust their banks and the banking system to a further extent than in many other countries.”

The move toward a cashless society has added to concerns that it could expand the gap between rich and poor, many of whom don’t have easy access to banks, credit or the technology that easily enables non-cash transactions. Of the roughly 7 percent of U.S. households that don’t have bank accounts, 70 percent use cash daily to make purchases, according to a 2017 survey by the Federal Deposit Insurance Corporation, the federal agency that guarantees bank deposits.

In some parts of the country, political leaders are beginning to push back against the move towards cashless-only transactions. In New York, example, City Councilman Ritchie Torres has proposed legislation that would prohibit businesses in New York City from becoming cashless.

The trend could also expand the divide between rich and poor countries, economists said. Electronic transactions are far more efficient than cash payments, and that efficiency can provide a boost to economic growth.

In Mexico, for example, about half of households earn $500 a month or less and don’t have bank accounts. Credit card interest rates can also top 30 percent.

Roughly 90 percent of consumer payments in Mexico are made in cash, of according to PYMNTS.com, a website that covers the payments industry. That dependence on cash cuts Mexico’s economic growth rate by a half percentage point, Luis Mauricio Torres, an analyst and the Institute of Mexican Competitiveness, a think tank in Mexico City.

“From a public policy perspective, cash is the language that our economy speaks,” said Torres.

Opportunity cost

The financial services sector, meanwhile, is continuing to push non-cash options, including contactless payments, secure transactions also known as tap and go. Such payment systems, which include Apple Pay and Google Pay, are estimated to grow worldwide to 450 million people by 2020.

But the proliferation of these and other electronic payments may increase economic efficiency, they are not without another cost. For centuries, the exchange of cash has provided the opportunity for people to meet in person and interact, if only for a moment. That is becoming less common, according to Kaariniemi, the Swedish translator.

“It is very convenient, but there is a fear that I am not sure this is a good thing or what it will lead to,” Kaariniemi said. “It is in the culture to deal as little as possible with other people, but you also hear people complain about loneliness, so it is kind of schizophrenic.”

She used to be on the energy desk for the Houston Chronicle, covering a range of issues from BP's Deepwater litigation to electricity pricing to Chesapeake Energy's tumultuous finances. Emily previously covered the Financial Accounting Standards Board for Thomson Reuters and water finance for Global Water Intelligence. She has worked as a policy analyst for the Government Accountability Office and as a humanitarian auditor for CARE, where she travelled to Bosnia, Haiti, Mozambique and other far flung locations.

In her free time, Emily writes and plays music, and is still secretly hoping that her jazz rendition of "Living Life Post-Subprime" will one day top the charts.